Sifting Through the Final Act of 2006

By U.S. Senator Jon Kyl As Congress finished legislative business for the year, it approved only a few bills. The main one was a bill I introduced with Senator Dianne Feinstein, which provides an appeals avenue for tax relief for individuals who the Internal Revenue Service claims liable for a spouses tax backlog (frequently in a divorce setting). That bill was amended to add numerous important tax provisions summarized below. Tax Deduction for Teacher Classroom Expenses As the son and brother of public school teachers, I am very aware of the sacrifices teachers must make. When I first came to the Senate, I proposed that teachers who spend their own money on classroom supplies receive a credit on their taxes for these expenses. A variation of this proposal became law in 2002 in the form of the $250 tax deduction, and the bill recently approved extends this credit for teachers through 2007. Tax Deduction for Higher Education Expenses The legislation also renews a provision that allows taxpayers to deduct up to $4,000 (depending on their income) for higher education expenses. This deduction will benefit families sending their kids to college, especially middle-class families that do not qualify for Pell grants or other student loans, yet still require financial assistance to help defray the cost of sending their children to college. Families get the full benefit of the deduction if they make up to $65,000 as a single person and up to $130,000 as a couple. Beyond these levels, the benefit phases out. Improving Health Savings Accounts The bill also contains provisions aimed at improving Health Savings Accounts (HSAs). Created in 2003, HSAs were designed to help individuals save for future, qualified medical and retiree health expenses on a tax-free basis. The provisions in the bill make it easier to use HSAs. For example, the bill alleviates the concern over whether adequate funds would be available during the early stages of HSA enrollment, should a participant face an unexpected health expense, by allowing participants to roll-over available funds, one time, from an individual retirement account. The bill also fixes an unintended glitch that makes it difficult to contribute to an HSA if you have a Flexible Spending Account. And lastly, it also allows employers to contribute increased amounts to HSAs of lower-wage employees. Ensures Medicare Beneficiaries Access to Quality Health Care Medicare currently relies on an antiquated payment system that does not appropriately reflect the cost of providing care. This legislation prevents a scheduled five percent cut in Medicare physician payments for 2007. Without this bill, it is probable many physicians would no longer be able to treat Medicare patients, so the bill will help ensure beneficiaries' access to quality healthcare. The bill also prevents additional payment cuts to physicians treating Medicare beneficiaries in rural areas. Advances Vaccine Research for Valley Fever The bill establishes a grant program to encourage the research and development of a Valley Fever vaccine and support ongoing research efforts, such as those at the University of Arizona. Valley Fever is an infection endemic in Arizona and the desert Southwest. On occasion, Valley Fever results in a serious, widespread infection involving the lungs, bones, brain, and other parts of the body. Currently, there is no vaccine that prevents Valley Fever. Sen. Kyl serves on the Senate Finance and Judiciary committees and chairs the Republican Policy Committee. Visit his website at www.kyl.senate.gov